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How to get out of your cross lease before it becomes a “living hell”

SIMON MAUDE
21:27 Oct 02 2017

CHRIS SKELTON/STUFF
Auckland woman Nisha Nayyar is locked in a bitter dispute with her neighbours after they began major alterations which blocked the shared driveway and flooded the property.

Thousands of New Zealanders could find themselves in a cross lease "living hell" – but it is possible to escape it.

The plight of solo mother Nisha Nayyar and her two children has highlighted the problems of cross lease properties, after her neighbours demolished their house.

Nayyar found her driveway blocked, property flooded with mud and debris, and her driveway blocked by building trucks with only a costly arbitration process open to her.

CHRIS SKELTON/STUFF
Nayyar and her neighbours are on a cross lease and all own a share of the land on which their houses sit.

The building work is all on property Nayyar technically owns, and it is all Auckland Council approved.

READ MORE:
* Cross lease 'living hell' heats up with police called in to probe assault claims
* Family in 'living hell' after neighbours demolish house without consent
* How to get a resource consent
* How to keep neighbours happy during renovations

Police are now investigating an assault claim after the stoush intensified over the weekend.

SUPPLIED

Joanna Pidgeon said cross lease holders should all try and get agreement to split.

Nayyar has described the situation as a "living hell" and said the council "blatantly" ignored her ownership.

WHAT IS A CROSS LEASE?

A cross lease property is one where multiple people own an undivided share in a piece of land.

The homes they build on the land – usually flats or townhouses – are leased from the other land-owners, normally for a term of 999 years.

Cross leases were originally developed in the 1960s as a way of getting around subdivision regulations.

Today, there are 215,000 cross lease titles in New Zealand. More than half of those are in Auckland, but there are many in all of New Zealand's urban centres.

New Zealand's legal experts have long warned of the dangers of cross leases, with Auckland District Law Society president Joanna Pidgeon calling them "a ticking timebomb".

So how do you get out of a cross lease if you want to?

LEAVING A CROSS-LEASE

The process of leaving a cross lease is costly, but the cost would likely be offset by a higher property value if it was subdivided into fee simple titles.

Firstly, Pidgeon said owners should try and get agreement amongst all the cross lease shareholders to split. Otherwise, you're more than likely to wind up getting a costly court-ordered breakup.

Next, the property needs accurate surveying and divvying up according to the original cross lease terms.

Boundary lines, utility supply and access rights need to be established. Remedial work racking up thousands may need to be done.

Shared driveways are a common issue to resolve – one or more shareholders will take driveway ownership, but have to grant an easement allowing in-perpetuity access for all new title holders.

Then, lawyers need to be involved to draw up new titles.

FEE SIMPLE, UNIT TITLE, OR WHAT?

Unit titles are most suitable for shared living complexes, typically apartment blocks.

According to realtors Barfoot & Thompson, a unit title property means you own a "defined part of a building, such as an apartment, and share ownership in common areas like lifts, lobbies and driveways".

You automatically become part of the building's body corporate and are subject to its rules and fees normally used to maintain and improve the building.

Fee simple is where you own the whole of the land.

Auckland law firm Smith and Partners said a fee simple title was "considered to be the title with the greatest benefit to the owner in respect of enjoyment and use".

PROS AND CONS

There are some good reasons to consider converting a cross lease to 'fee simple' or freehold – and some good reasons not to.

Those who switch to freehold no longer have to ask permission to get alterations done to their home.

It also removes the worry of what happens when good neighbours sell and obstinate new owners move in.

However, those in cross leases may appreciate the power they have in being able to prevent their neighbours from doing obtrusive alterations.

Stuff

Cross-lease properties can be 'ticking time bombs', warns top lawyer

20 Sep, 2018 8:55am 5 minutes to read

Flats are often on cross lease sites. Photo/Bevan Conley

By: Anne GibsonProperty editor, NZ Herald anne.gibson@nzherald.co.nz @anneherald

Thinking of adding a garage, deck or pergola to your cross-lease property or getting a dog?

Beware, a top lawyer says, warning owners of more than 100,000 Auckland properties that people sometimes overlook their legal obligations by making changes without neighbours' written consent or in breach of their cross leases.

Joanna Pidgeon, Auckland District Law Society president, says cross-lease titles are "ticking time bombs" due to the potential for disputes between owners. The titles have specific provisions on use set out in their leases and people needed to beware of that.

New Zealand has about 216,000 cross lease property titles of which about 100,000 are in Auckland, she estimated.

Read more: Cross lease titles cause cross owners

The common form of shared ownership often applies to brick and tile ownership flats or houses, developed around the 1960s in urban areas, she said. Owners can face big fees if they wanted to make changes to houses or units on such land, add another level, introduce a deck or make major renovations.

Before any major building work took place on a cross-lease title, owners must get their neighbours' written permission, she reminded owners, and that is already in their lease agreements, and they will probably also need to deposit a new flats plan, incurring Council and subdivision costs.

"Cross-lease owners often think that if they have building consent from a council, that they don't need a neighbour's written consent for structural alterations. The question is: what is a structural alteration? Removing a non-load bearing internal wall might not be, adding another floor or extending would be," Pidgeon said.

"Cross leases say that disputes need to go to arbitration, however, some disputes can still be resolved in the Disputes Tribunal if they are not title disputes," she said.

David Whitburn, a former lawyer and professional property investor, said: "Knowledge around cross-lease titles is woeful because some people do more due diligence before they buy a car or TV than when buying a home and they often don't realise the traps of cross-lease titles."

Even a house colour might spark a dispute, he said. Trees were another contentious issue because if they caused interference or nuisance, a neighbour could seek removal, Whitburn said.

Joanna Pidgeon warns of restrictions on cross lease titles.

Pidgeon sent a copy of a typical cross-lease document which outlined the exact provisions, showing flats can only be used for residential purposes and not for activities that could be a nuisance to other occupiers of the land - and that's where pets can come in.

Owners can't bring onto or keep on the land any pet or animal which may interfere with the quiet enjoyment of the lessees or occupants of any building, she said citing a standard cross lease agreement.

Owners can't have dangerous goods or devices: "This may affect you if there are gas cylinders for cooking or heating installed at the property," the typical cross-lease agreement said.

The interior and exterior of buildings must be kept in good condition. Cars cannot block access. Staircases, passageways, parking areas, driveways and turning areas must also be kept accessible, the agreement said.

"The lessee will not make any structural alterations or additions to the flat without the prior written consent," the lease says and Pidgeon says that clause was a fraught area.

People might make an addition, such as adding a deck. But without consent of others who share the title, that would not be legal, she said. While some leases state consent may not be unreasonably withheld, some older cross leases do not have a "reasonableness" requirement. Issues such as sunlight, view and privacy are often grounds raised for withholding consent.

Cross-lease owners must have a current insurance policy but Pidgeon said they often don't insure with the same insurance company "which caused problems with the Canterbury earthquakes."

Andrew King of the Property Investors Federation.

Andrew King, NZ Property Investors Federation executive officer, has owned cross-lease properties and he too acknowledged restrictions.

"When you have a cross lease, you are leasing your section from the person next door and they're leasing theirs from you. That's a bit simplistic but it's what's happening. On the title, you have the entire section of land but it shows your flat and the portion and where the exclusive rights areas are as well as things like chimneys and porches.

"If you want to build anything outside the existing structures, you need to get the usual permission from the council but also from your neighbours," King said.

"It's relatively straight-forward but problems can arise if you want to build on your cross lease property. It's more expensive [than other forms of title] because you might have to get the plans for the entire property redrawn. And you have to get written permission from all the other owners."

Changes to interiors such as removing an interior wall were not restricted, he said. But adding a garage, carport or even garden pergola could trigger the need for neighbours' consent, King said.

"A spa pool should be alright because it's under 10sq m and moveable and not a permanent structure. But a pergola might be a different matter," King said. "But having said that, lots of people would just go the neighbour and then whack it up."

Pidgeon said problems could arise when cross lease titles were advertised for sale and titles did not match building footprints. Structures might then have to be entirely removed at the owner's expense or consent sought from neighbours, and a new flats plan deposited, which can be expensive.

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